ESPN On-Air Talent About To Care About The Cord-Cutters The Execs Aren't Concerned About

from the disconnect-over-the-disconnecters dept

It's been more than a bit perplexing to watch ESPN, sports television giant though it may be, shrug its shoulders at the cord-cutting trend that has refused to bend to the network's pleasure. With streaming being a thing, and that super-charging the cord-cutting revolution, we've made the point for some time that the sports broadcast industry was eventually going to feel the grip of fewer subscribers, as has been the case with much of the rest of the television medium. Yet ESPN barely reacted at all to cord-cutting, other than to insist that established ratings systems are crap and that its loss of millions of subscribers over the past few years was of no concern, mostly because those subscribers were poor. ESPN President John Skipper said just last year:

People trading down to lighter cable packages. That impact hasn't leaked into ad revenue, nor has it leaked into ratings. The people who’ve traded down have tended to not be sports fans, and have tended to be older and less affluent. We still see people coming into pay TV. It remains the widest spread household service in the country after heat and electricity.

Yet those comments came almost immediately after a huge round of layoffs at the network in 2015, trimming the behind-the-camera staff to what is essentially a skeleton crew. Still, stock prices stalled for Disney, with much of the blame being placed upon ESPN's subscriber loss. Some market experts have made some rather bold predictions that the subscriber woe for ESPN is over-hyped, even going so far as to predict massive market gains for Disney this year. That optimism seems to be largely built on the recent investment ESPN has made into digital distribution and streaming options. But if anyone out there is buying such optimism, the executives at ESPN do not seem to be among them.

Richard Deitsch at Sports Illustrated has a detailed write-up of ESPN's plans for its on-air talent in 2017 and it certainly looks like that talent is going to have reason for concern about cord-cutting that the executives lack.

SI has learned that ESPN will have significant cost-cutting over the next four months on its talent side (people in front of the camera or audio/digital screen). Multiple sources said ESPN has been tasked with paring tens of millions of staff salary from its payroll, including staffers many viewers and readers will recognize. Those with contracts coming up would be particularly vulnerable, sources said. The company is also expected to buyout some existing contracts, which is something rare for ESPN historically beyond a few NFL talents. The cuts are expected to be completed by June. Sources within ESPN say that there is no set list of names yet and stressed that behind-the-scenes people will likely (key word) not be impacted by these cuts.

Last month Reuters reported Disney had a lower-than-expected quarterly revenue, hurt by the drop in advertising revenue at ESPN. In addition, ESPN continues to shed subscribers at an enhanced rate, down to 88.4 million households in Dec. 2016. That number was 100.002 million in Feb. 2011.

It had to happen eventually. A network can't drop subscribers at rates in the double-digits without eventually taking a hit on the ad-revenue. Couple that with the sports licensing landscape in which partnering with teams and leagues has never been more expensive and it becomes difficult to see a way out this wilderness for ESPN. And, if this seems like a terrible trend for a business generally, it's particularly bad for a brand like ESPN, whose on-air talent has always been a key part of its success. The network likes to argue that it makes the talent popular and not the other way around, and it has some recent examples that demonstrate this to some degree, but the truth is that the talent and the network are more symbiotic than that. There's a reason why the retirement of Chris Berman, annoying slogan peddler though he may be, is such a big deal. He's been a titan for the network. Replacing that while cutting pay for the on-air talent is a unenviable task, to say the least.

And, just to be clear, this is mostly to do with cord-cutting and the numbers we're talking about are enormous.

The most immediate causes of the layoffs are clear. Over the last several years rights fees have skyrocketed, with ESPN now paying over $3.3 billion annually just to broadcast the NFL and NBA. Simultaneously, ESPN’s subscriber count and viewership—the fabled dual revenue stream that has made it the most envied television company in the country—have tumbled. While the loss of 12 million subscribers over five years is mostly due to generalized cord cutting, and not subscribers specifically dropping ESPN, it doesn’t really matter: It still amounts to losing almost a billion dollars annually. The status quo is unsustainable, and with rights fees already locked in for several years, salaries are one of the biggest areas available to cut expenses.

This how media giants die. Not quickly, or with mercy, but rather by being slowly bled to death by the reality of new times and un-adopted innovation. Sources from inside the company suggest ESPN execs weren't even discussing the cord-cutting trend until 2015. It seems that may prove to have been too late to right the ship in Bristol.

Filed Under: cord cutting, espn, layoffs
Companies: disney, espn

After Losing 10,000 Viewers Per Day, ESPN Finally Buckles To Offering Standalone Streaming Video Service

from the swimming-upstream dept

For years now, ESPN has been the perfect personification of the cable and broadcast industry's denial regarding cord cutting. Long propped up by a system that forces consumers to buy massive bundles of largely-unwatched channels, ESPN has struggled with the rise of streaming alternatives and sleeker, "skinny" channel bundles. The sports network, which has lost 7 million viewers in just a few years, has been trying to argue that these losses (which caused Disney stock to lose $22 billion in value in just two days at one point) are simply part of some kind of overblown, mass hallucination.

Last year, ESPN exec John Skipper even went so far as to suggest that these departing customers weren't worth keeping anyway:

"People trading down to lighter cable packages. That impact hasn't leaked into ad revenue, nor has it leaked into ratings. The people who’ve traded down have tended to not be sports fans, and have tended to be older and less affluent. We still see people coming into pay TV. It remains the widest spread household service in the country after heat and electricity."

In other words, there's "nothing to see here" -- outside of the total collapse of our entire legacy business model. At one point late last year, ESPN even went so far as to make a giant (unwarranted) stink about Nielsen data showing the cable channel had lost 621,000 homes in a single month. Things still aren't looking particularly good for the company, with Disney's earnings indicating that ESPN is fairly consistently losing about 10,000 viewers per day. That's not surprising when you see surveys indicating that 56% of subscribers would drop ESPN in a heartbeat if it meant saving the $8 per user the channel is estimated to cost consumers.

Despite these numbers, Skipper and other ESPN executives have spent the last few years insisting that offering a standalone streaming app (you know, evolving for the market you're doing business in) wasn't financially viable:

"We could sell ESPN, as a standalone product, but we don't believe it to be a good business," Skipper said. "We're in 90 million homes," he added, "so no, we do not have a contemplation now that we would launch as a standalone."

That was then, this is now. And ESPN executives appear to have been overruled by Disney higher ups. Speaking on the company's recent earnings call, Disney CEO Bob Iger said that ESPN would now be conducting an about-face, and would launch a standalone streaming video service sometime in the next year or so:

"Iger affirmed that ESPN will launch a branded standalone streaming service later this year, in partnership with BAMTech, the digital technology firm in which Disney bought a $1 billion stake last year. He also talked up the prospects for ESPN to offset the industry-wide trend of declining subscriber rates via from traditional MVPDs through gains from the handful of upstart streaming channel packages that are in the works."

Necessary evolution -- how novel! Granted, ESPN's still on the hot seat. I've heard from several industry insiders familiar with ESPN's contracts with cable companies that language currently prevents cableco's from breaking ESPN out of the core channel lineup (something ESPN sued Verizon for in 2015, because of course) unless ESPN offers its own streaming service standalone. In other words ESPN's in for a rocky stretch either way.

Either the company launches a streaming video service that encourages cable companies to kick ESPN from the core bundle, further eroding ESPN's traditional cable customer totals, or they refuse to offer such a service and these users leave anyway. But when you're facing a major dismantling and reconfiguring of a legacy industry due to disruption, it's better to be out in front of it and ready to meet evolving user demand, than stumbling around blindly in denial.

Filed Under: ott, over the top, sports, video streaming
Companies: espn

Despite ESPN Whining, Nielsen Confirms Historic Subscriber Losses For Channel

from the not-just-a-river-in-Egypt dept

Last week, we noted how Disney and ESPN threw a bit of a hissy fit when Nielsen data indicated that ESPN had one of the biggest subscriber losses in company history last month. According to Nielsen's data, ESPN lost 621,000 homes in a single month, as well as losing 607,000 ESPN2 households and 674,000 ESPNU homes. That's of course on the heels of losing more than 7 million subscribers over the last three years or so, thanks largely due to the rise of cord cutting, cord trimming (scaling down your TV package) and the rise of some "skinny bundles" that exclude ESPN from the base channel lineup.

ESPN demanded that Nielsen withdraw its numbers, insisting they represented a "dramatic, unexplainable variation" that didn't match ESPN's own numbers. Nielsen obliged, but after conducting an "extensive" review of the numbers found them to be "accurate as originally released." Of course, this shouldn't be a surprise; we've noted how everybody but ESPN appears to have seen the writing on the wall. But instead of adapting to the changing times, ESPN responded by denying that cord cutting was real, and suing companies like Verizon for trying to bring some flexibility to the traditional cable bundle.

Not too surprisingly, ESPN's response in light of Nielsen confirming its numbers was to continue denying the very obvious fact that customers are tired of paying an arm and a leg for sports programming many of them simply don't watch. From an ESPN statement given to the media:

"This most recent snapshot from Nielsen is a historic anomaly for the industry and inconsistent with much more moderated trends observed by other respected third party analysts. It also does not measure DMVPDs and other new distributors and we hope to work with Nielsen to capture this growing market in future reports."

Except it's not an "anomaly" at all if you've been watching ESPN's subscriber base drop 2-4% per year right alongside dips in other broadcast ratings. Even sports, long believed to be the untouchable holy grail of television programming, has been suffering a notable decline as younger viewers look for cheaper, more flexible alternatives to the bloated cable bundle. ESPN's response to these challenges? Either outright denial or incorrect claims by company executive John Skinner that these departing customers are old, poor, and not worth keeping anyway.

ESPN is the biggest beneficiary of the old method of bloated, overpriced channel bundles, but like so many broadcast and cable companies, it's too terrified of prematurely harming the existing cable TV cash cow to try anything truly innovative. As a result, the company is seeing historic losses in subscribers, with apparently everybody but ESPN seeing that this adaptation (like a standalone streaming service) will need to come sooner rather than later.

Filed Under: cord cutting, espn, ratings, subscribers
Companies: disney, espn, nielsen

Nielsen Forced To Pull Report Offline After It Shows ESPN Losing More Subscribers Than Ever

from the head-firmly-in-the-sand dept

ESPN has been losing hand over fist as consumers shift to streaming alternatives and new "skinny" TV bundles of smaller channels. The company is estimated to have lost roughly 7 million subscribers in just a few years, and a recent survey found that 56% of consumers would drop ESPN in a heartbeat if it meant saving $8 a month on their cable bill (the estimate of how much ESPN costs each subscriber). The losses are largely thanks to ESPN executives failing to see the cord-cutting threat coming. Apparently it's difficult to identify shifting viewership trends with your head buried squarely in the sand.

Fast forward to this week, when viewer-monitoring firm Nielsen released a report stating that ESPN lost more subscribers than ever last quarter. According to the original Nielsen report, ESPN lost 621,000 homes in a single month, as well as losing 607,000 ESPN2 households, and 674,000 ESPNU homes. Interestingly, ESPN was quick to complain that these numbers were in error:

"The Nielsen numbers represent a dramatic, unexplainable variation over prior months’ reporting, affecting all cable networks. We have raised this issue with Nielsen in light of their demonstrated failures over the years to accurately provide subscriber data. The data does not track our internal analysis nor does it take into account new DMVPD entrants into the market."

As a result, Nielsen was forced to issue a statement saying it was pulling the findings for review:

"Nielsen is investigating a larger than usual change in the November 2016 Cable Network Coverage Universe Estimates (versus the prior month). We take the accuracy of our data very seriously and are conducting a thorough analysis to determine whether or not there is an issue with these estimates. In the meantime, we have removed the November 2016 Cable Network Coverage Universe Estimates file from the Answers portal and ask clients not to use the numbers that were posted Friday. We are working closely with clients and will alert them on the findings of our internal review."

While it's entirely possible Nielsen did make a mistake, this isn't the first time the company has been willing to withhold data simply because the cable and broadcast industry didn't like what the data indicated. In 2014, Nielsen backed away from including broadband-only household data in the firm's local TV ratings service because broadcasters didn't like what that data said. The company spent many years denying that cord cutting was real, then simply changed the name of cordcutting to "zero TV households" when it was forced to actually ackowledge the trend was real.

Again, Nielsen may have flubbed the data and the estimates could be a little too high (given past trends likely not by much), but it's also entirely possible this is just part of an ongoing attempt by the cable and broadcast industry to shield itself from the reality of evolving markets.

Filed Under: cord cutting, monitoring, subscribers, tv
Companies: espn, nielsen

Court: Okay For Trial To Move Forward Against ESPN For Tweeting JPP's Medical Chart

from the getting-the-finger dept

The Fourth of July is long in our rearview mirrors, but for some folks the holiday haunts them still. Such is the case with NFL football player Jason Pierre-Paul, who quite famously managed to celebrate our nation's independence by blowing apart a good chunk of his hand a year and a half ago. So too does the holiday likely remain top of mind for ESPN and its reporter, Adam Schefter, who found themselves in a bit of controversy after reporting on Pierre-Paul's condition and tweeting out a copy of the player's medical chart, revealing that he had no digits where there previously had been fingers. Pierre-Paul sued Schefter and ESPN for invading his privacy, arguing that he'd suffered great harm as a result and suggesting that, though Schefter had received the medical chart from a source, the publication of such information might make it less likely for other famous persons to seek medical treatment in the future. ESPN, meanwhile, attempted to spike the lawsuit on First Amendment grounds under an anti-SLAPP statute, arguing that journalists have always been free to provide evidence for stories gained from sources.

Well, the court has ruled against ESPN's attempt to have the suit dismissed, saying the lawsuit will proceed.

New York Giants defensive end Jason Pierre-Paul is suing ESPN and star reporter Adam Schefter over a tweet that revealed an amputated right finger as a result of a July 4 celebration last year. The NFL star asserts he suffered great damage when Schefter showed his four million followers a copy of Pierre-Paul's medical chart. But despite ESPN's First Amendment arguments, a judge on Thursday rejected ESPN's attempt to dismiss, according to a statement from Pierre-Paul's attorney.

ESPN, represented by the same lawyers that represented Gawker, argued that courts "have consistently recognized that a journalist is entitled to include visual evidence corroborating a report on a matter of public concern."

ESPN's lawyers also pointed out that Pierre-Paul is not suggesting that Schefter was prohibited from reporting on the exact details within the chart, which was the actual harming information if any harm actually was done, but that tweeting out the medical chart image itself suddenly was actionable. Why Pierre-Paul chose this attack on ESPN and a journalist rather than whatever source shared the chart with Schefter in the first place is largely left unaddressed, although the depth of the parties' respective pockets likely has something to do with it.

Regardless, this is a disappointing ruling on many levels. Those seeking medical attention certainly do have an expectation of privacy from those providing the healthcare work and one would think HIPAA violations may be in play here as well, but Pierre-Paul has no such expectation of privacy from a journalist covering him. The proper defendant in this case is obviously whomever provided the chart to Schefter and likely over HIPAA violations. Whatever the implications upon privacy at issue here, it seems quite clear that chilling the reporting of journalists who receive information from sources is not hte proper vector for addressing those issues. Between this and the Gawker case, along with the public comments by one well-known would-be politician, we seem to entering a different era in terms of how the press is viewed and treated in America.

Filed Under: adam schefter, first amendment, hipaa, jason pierre-paul, journalism, medical reports, privacy
Companies: espn

FCC 'Probing' Whether Cable Companies Have Sabotaged Internet Video

from the well,-duh dept

Most people realize that the cable and broadcast industry has worked tirelessly to protect its legacy cash cow from disruption. Dish was forced to make its ad-skipping DVR less useful if it wanted streaming licensing rights. Fox, Disney and Comcast/NBC for years kept Hulu from being too disruptive. ESPN sued Verizon for trying to offer more flexible TV lineups. Apple keeps running face first into broadcasters terrified of real disruption with its own TV plans. That's before you even get to cable companies busy capping and metering usage to hurt streaming services, while zero rating their own services for competitive advantage.

Gosh, it's almost as if there's a broad, coordinated, decade-long effort to keep legacy television expensive, barely-competitive, and shitty.

Enter the FCC, which, according to a Wall Street Journal report (registration required), is "probing" whether there's a coordinated effort by the cable and broadcast industry to keep Internet video from truly taking off. Though there's a number of ways the industry does this, the FCC's latest inquiry is focused on cable companies demanding broadcasters not license content to competing streaming services:

"Some evidence suggests the restrictive clauses may have effectively kept many TV programs off the Internet. Several big tech companies have tried to start Internet TV services, but have found it hard to get programming because of the exclusivity provisions. One new online TV venture, Sling TV, a subsidiary of Dish Network, says it suffered months of delay because of challenges posed by the contract clauses.

“When we launched Sling, one of the toughest things [was that] many of the programmers…had conditions in their programming agreements with other distributors that did restrict them in how they could license content,” Roger Lynch, Sling’s CEO, said in an interview."

So yes, some cable operators have demanded broadcasters intentionally limit who they offer service to, and you'd assume that Dish has forwarded something vaguely-resembling evidence to the FCC.

But the Journal report is oddly myopic in its coverage of the issue, vaguely implying that broadcasters like Disney, Fox, et al aren't also part of the problem. Disney for example owns ESPN, which again sued Verizon for upsetting the status quo of bloated, expensive channel bundles. Comcast/NBC took steps to hinder Hulu's growth despite being theoretically prohibited (via NBC merger condition) from Hulu management. Fox, meanwhile, has sued the hell out of any company attempting to do anything to so much as jostle the traditional TV apple cart.

This all comes up now because the FCC is reviewing Charter's attempted merger of Bright House Networks and Time Warner Cable. The regulator is fielding concerns from numerous companies that the merger will create another Comcast with a vested interest in hurting streaming video. Comcast's attempt to acquire these same companies was blocked, you'll recall, because the combined power of a broadcaster, cable operator and broadband company worried regulators (well, that and Comcast was immeasurably full of shit during its sales pitch).

Charter, by contrast, doesn't have the broadcast power of Comcast. And while Charter's customer service rankings are almost as bad as Comcast's, for whatever reason the company doesn't generate the same negative public sentiment, meaning less political pressure on the FCC to block the deal. To try and seal the deal, Charter has even gone so far as to hire respected neutrality advocate Marvin Ammori to help craft a company promise to avoid usage caps and adhere to net neutrality for (an admittedly unimpressive) three years after the deal is signed.

As such you're likely to see the FCC approve the deal, and the "probe" the Journal references is the regulator feeling out just what the conditions should be. Prohibiting Charter from agreements intentionally designed to sabotage streaming video competition might be a start, but it's not going to hinder the broadband and cable industry's primary avenue attack against Internet video: usage caps and zero rating. And so far, the FCC has been utterly comatose in its response to how Comcast and Verizon are using caps to give their own content a distinct marketplace advantage.

It's all well and good if the FCC wants to aid streaming video competition by opening the set top box or thwarting anti-competitive deals, but if the agency doesn't seriously address broadband competition, usage caps and zero rating, streaming video's just going to find itself choked off on the other end of the line. If the FCC wants to help, it can start by "probing" whether usage caps are necessary, whether the meters being used are accurate, and whether it made a mistake when it decided on net neutrality rules that pussy foot around the obvious problems caused by zero rating.

Historically telecom and cable merger conditions imposed by the FCC are sad, mostly meaningless, restrictions volunteered by the companies themselves (which they still often fail to adhere to). The FCC's going to have to dramatically change this historical narrative if it seriously hopes to keep the cable and broadcast industry from waging all-out-war on disruptive streaming alternatives.

Filed Under: collusion, competition, fcc, internet, internet video
Companies: apple, comcast, disney, espn, fox, hulu, verizon

Disney's Iger On ESPN: We'll Disrupt When We Damn Well Feel Like It

from the worldwide-leader-in-denial dept

Last year, Disney stock took a repeated beating as Wall Street started to realize the company wasn't faring particularly well in the face of Internet video revolution. Tens of billions in stock value instantly evaporated as investors learned that ESPN had lost 7 million customers in just the last two years. Evidence suggests this was largely thanks to the fact that ESPN leadership was utterly oblivious to the cord cutting and cord trimming trend, or the fact that a growing number of customers (the majority, in fact) are simply tired of paying for a channel they don't watch, yet pay an arm and a leg for.

To try and soothe nervous investors, Disney and ESPN executives have been making the rounds lately in an attempt to "change the narrative" on cord cutting (read: pretend the company wasn't caught with its pants down). ESPN Boss John Skipper, for example, recently admitted the company is seeing subscriber losses due to users shifting to so-called "skinny" bundles, but tried to argue these were older users the company didn't really want anyway.

This week, Disney CEO Bob Iger is the one making the rounds, though you may not be able to hear what he's saying over the sound of his own denial:

"The notion that either the expanded basic bundle is experiencing its demise or that ESPN is crating in any way from a [subscribers] perspective is just ridiculous,” Iger said at one point. “Sports is too popular.”

But despite what Iger thinks, ESPN is not synonymous with sports, and cratering under the load of an evolving market is exactly what's happening. For decades, ESPN enjoyed being part of channel bundles that generated revenue regardless of whether or not consumers actually watched it. As the traditional cable bundle gets broken up, ESPN's faced with the fact that 56% of cable users no longer want to watch the channel if it means saving a little money. In response, ESPN's trying to sue companies trying to give consumers what they want, a losing proposition long term.

As alternative streaming options rise, ESPN subscribers will dip, and the company's long-term (and hugely expensive) sports programming deals are going to start feeling very heavy. ESPN could try and offer a direct streaming service, but with dropping subscribers and soaring programming costs, the numbers aren't very pretty. Just don't point any of this out, or, like pay TV analyst and frequent ESPN critic Richard Greenfield recently found out, certain media outlets may decide to set you on fire in the Hollywood town square.

Like so many legacy industries used to revenues they haven't actually had to earn in years, it's pretty clear that Iger believes that ESPN is the one that gets to decide when it gets disrupted and when it has to dirsupt:

"We’re not going to sit back and let the disrupters just disrupt,” Iger said. “We’re going to participate in some of that disruption. And we’ll decide when the time is right to be more disruptive than we have been if we really think the business model is shifting rapidly. So far we do not see that."

Like most people, ESPN execs see what they want to see. Wall Street now sees it, which is why Iger's flapping his arms and doing this particular chicken dance in the first place. It's all part and parcel of the cable and broadcast industry's sincere belief that the legacy cable TV cash cow is going to live forever -- so they really don't have to rush to adapt -- or compete on price -- any time soon. But years of denial and inflexibility are starting to catch up with executives mentally stuck in the late nineties, and if 2015 was any indication, 2016's going to demolish any lingering fantasies.

Filed Under: bob iger, disruption, espn
Companies: disney, espn

ESPN Gets Nielsen To Revise Its Data To Suggest Cord Cutting's No Big Deal

from the massaging-statistics dept

We've discussed for years that as an apparatus directly tied to the wallet of the cable and broadcast industry, TV viewing tracking company Nielsen has gladly helped reinforce the cable industry belief that cord cutting was "pure fiction." Once the trend became too obvious to ignore, Nielsen tried to bury cord cutting -- by simply calling it something else in reports. And while Nielsen was busy denying an obvious trend, it was simultaneously failing to track TV viewing on emerging platforms, something the company still hasn't fully incorporated.

We've also been talking about how ESPN has been making the rounds, trying to "change the narrative" surrounding cord cutting to suggest that worries about ESPN's long-term viability in the face of TV evolution have been overblown. Part of that effort this week apparently involved reaching out to Nielsen to demand the company fiddle with its cord cutting numbers, which ESPN then peddled to reporters in the hopes of creating an artificial, rosier tomorrow:

"On Thursday, ESPN reached out to reporters to let them know that cord-cutting isn’t nearly as bad as it sounds, and that the reason is the way Nielsen revised its pay-TV universe estimates. Nielsen (under client pressure) decided to remove broadband-only homes from its sample, but it didn’t restate historical data. It is now showing that, as of December, 1.2 million homes had cut the cord, a much smaller number than its earlier figure of 4.33 million homes for the year."

Isn't that handy! This of course isn't the first time Nielsen has tweaked troubling numbers on demand to appease an industry eager to believe its cash cow will live forever. The irony is that the same industry that's happy to gobble up potentially distorted data is simultaneously deriding Nielsen out of the other corner of its mouth as a company whose data is no longer reliable in the modern streaming video age. In a profile piece examining Nielsen's struggle to adapt, the New York Times (and Nielsen itself) puts the problem rather succinctly:

"Yet Nielsen is established on an inherent conflict that can impede the adoption of new measurement methods. Nielsen is paid hundreds of millions of dollars a year by the television industry that it measures. And that industry, which uses Nielsen’s ratings to sell ads, is known to oppose changes that do not favor it. “People want us to innovate as long as the innovation is to their advantage,” Mr. Hasker said.

Obviously getting a distrusted metric company to fiddle with data even further won't save ESPN. The company's SEC filings still suggest ESPN lost 7 million subscribers in the last few years alone. Some of these subscribers have cut the cord, but others have simply "trimmed" the cord -- signing up for skinny bundles that have started to boot ESPN out of the core TV lineup. Similarly, studies have recently shown that 56% of ESPN users would drop ESPN for an $8 reduction on their cable bill. This sentiment isn't going to magically go away as alternative viewing options increase.

BTIG analyst Rich Greenfield, who funded that survey and has been a thorn in ESPN's side for weeks (for you know, highlighting facts and stuff), had a little advice for ESPN if it's worried about accurate data:

"“If this is an important issue for ESPN, they should start releasing actual subscriber numbers rather than relying on third parties [Nielsen]. If they are upset with the confusion, let’s see the actual number of paying subscribers in the US over five years."

Wall Street's realization that ESPN may not fare well under the new pay TV paradigm at one point caused $22 billion in Disney stock value to simply evaporate. As a result, ESPN executives have addressed these worries in the only way they know how: by massaging statistics and insulting departing subscribers by claiming they were old and unwanted anyway. One gets the sneaking suspicion that's not going to be enough to shelter ESPN from the coming storm.

Filed Under: cord cutting, data, denial, measurement, metrics
Companies: espn, nielsen

ESPN Pretends It Saw Cord Cutting Coming, Says Departing Subscribers Old And Poor Anyway

from the not-just-a-river-in-Egypt dept

About once a week now you'll see a legacy broadcast executive take to the media to try and "change the narrative" surrounding cord cutting. Usually this involves claiming that things are nowhere near as bad as the data clearly shows, with a little bit of whining about an unfair media for good measure. ESPN, which has lost 7 million subscribers in the last two years, has been particularly busy on this front. The broadcast giant has been trying to argue that cord cutting worries (which caused Disney stock to lose $22 billion in value in just two days) are simply part of some kind of overblown, mass hallucination.

Speaking to the Wall Street Journal (registration required), ESPN President John Skipper "plays offense on cord cutting" by effectively denying that ESPN is even in trouble. He starts by proudly insisting that the huge losses in subscribers weren't a surprise to the company:

"We stayed pretty calm. [The loss of subscribers] didn’t come as a bolt out of the blue to us. We had been thinking about this. We had a big town hall meeting in December. We had a priorities meeting earlier where we gathered everybody together to try to ground ourselves in our business."

Right, except that former ESPN employees have said ESPN execs weren't even talking about cord cutting as a threat until 2015. The company was also spending hand over fist (like a $125 million update for the SportsCenter set), suggesting they didn't really see the subscriber dip coming. After pretending that cord cutting didn't catch ESPN by surprise, Skipper proceeds to admit that "cord trimmers" (people scaling back their TV packages) are a big reason for the subscriber hit, but that the losses aren't all that big of a deal because the departing customers are old and poor:

"People trading down to lighter cable packages. That impact hasn't leaked into ad revenue, nor has it leaked into ratings. The people who’ve traded down have tended to not be sports fans, and have tended to be older and less affluent. We still see people coming into pay TV. It remains the widest spread household service in the country after heat and electricity."

This narrative that cord cutters and cord trimmers are old, poor, and otherwise of no interest is a popular one among cord cutting denialists, but data consistently shows it's simply not true. Cord cutters and cord trimmers tend to be young, affluent consumers who are just tired as hell of paying an arm and a leg for channels they don't watch. And, if recent surveys are any indication, there are a lot of users who don't watch ESPN and are tired of paying for it. In short, most of the data suggests that ESPN has a lot more subscriber defections headed its way with the rise of so-called skinny bundles (an idea ESPN has sued to stop).

When asked what ESPN plans to do to attack the cord cutting trend, you'll note that Skipper's first instinct is to deny that the legacy cable industry really has all that much to worry about:

"We are still engaged in the most successful business model in the history of media, and see no reason to abandon it. We’re going to be delivering our content through the traditional cable bundle, through a lighter bundle, through Dish’s Sling TV, through new over-the-top distributors, and through some content that is direct-to-consumer."

When pressed for what "direct to consumer" services ESPN plans to offer, Skipper can only provide one example: the company's brief experimentation with streaming the Cricket World Cup. That's because ESPN's contracts with cable companies state that if the company actually evolves and offers a direct streaming service, cable companies are allowed to break ESPN out of the core cable lineup. That means more skinny bundles than ever, and an acceleration of ESPN's problems. So, like a child in the dark, ESPN has decided to hide under the covers and pretend the monster under the bed isn't real.

There's no doubt that Disney and ESPN will eventually figure things out and balance the need for innovation with their desire to protect their existing businesses, but it's pretty clear from public comments and past decisions that it's going to be an ugly transition. That transition would be so much less ugly for many legacy broadcast companies if they spent a little less time trying to "correct narratives" telling them truths they don't want to hear -- and a little more time preparing to compete with the internet video revolution.

Filed Under: cord cutting, subscribers
Companies: disney, espn

56% Would Drop ESPN In A Heartbeat If It Meant Saving $8 A Month On Cable

from the goodnight,-sweet-dinosaurs dept

Over the last year, ESPN's decision to laugh off cord cutting has truly come home to roost. The company has had to engage in numerous "belt tightening measures" after losing around 7 million subscribers in just two years. Where are these subscribers going? Many are cutting the TV cord entirely. Others are opting for so-called "skinny bundles" that pull pricier channels like ESPN out of the core cable lineup, moving them to additional, premium channel packs. Companies like Verizon that have experimented with skinny bundles have been rewarded for their efforts with with lawsuits from ESPN.

But there's every indication things will be getting worse for our friends at Disney and ESPN.

A new study commissioned by BTIG Research and analyst Rich Greenfield (registration required) found that 56% of those surveyed would happily ditch ESPN if it meant saving them $8 a month. 60% of females say they would ditch the channel for the $8 discount, while 49% of males would do the same. And while ESPN could pursue a standalone streaming service, 85% of those polled say they wouldn't subscribe at $20 a month, even if it bundled in all of the additional ESPN channels such as ESPN 2 and ESPN 3.

And there are some additional problems with ESPN pursuing a standalone streaming platform. ESPN's recent lawsuit against Verizon revealed that many of the channel's contracts with cable operators restrict them from breaking ESPN out of the core cable bundle; a provision that is nullified if ESPN offers a streaming version of its own. So ESPN could accelerate its own evolution in the face of cord cutting and go straight to consumers, but (at least initially) it would greatly accelerate the company's losses as more cable operators pull ESPN out of the core channel lineup.

The problem is effectively that ESPN has enjoyed more than a decade in an artificial bubble, where, thanks to the inflexibility of cable offerings, users were stuck paying for a channel they never watched. In that bubble, ESPN had no real motivation to adapt, and now the check is coming due thanks to internet video. But with the playing field changes, Greenfield's quick to note that even as a standalone option, there's simply no way that the financials work out (at least nowhere near the level ESPN's used to):

"The reality is that ESPN would likely have to charge dramatically more than $20/month/sub in a direct-to-consumer model, given the dramatic reduction in penetration rates..."The math for a direct-to-consumer offering for a basic cable network does not work, especially for channel(s) with very high monthly fees embedded within the current MVPD bundle. Disney cannot take ESPN direct-to-consumer and they know it, whether they admit that publicly or not. Furthermore, if the multichannel video bundle frays faster than expected and the TV ad market continues to weaken, ESPN's future growth prospects are dim, at best."

As The Weather Channel can attest, there's obviously going to be some casualties in the cord cutting revolution. As some companies like The Discovery Channel have been realizing, one way to ensure customers don't flee under the new paradigm of consumer is to focus on quality, a mysterious new frontier for broadcasters used to getting paid an arm and a leg for delivering the bare minimum.

Filed Under: a la cart, bundles, cable, cable tv, cord cutting, streaming, tv
Companies: disney, espn